Unsustainable human civilization on earth is now a reality. Awareness of this is steadily rising among governments, companies and consumers alike, creating opportunities for investors across the clean economy.
What is CleanTech?
Clean technology, commonly referred to as CleanTech, was first introduced in the late 1990’s1 and refers to companies who seek to have a positive environmental impact, by developing new technology across areas such as energy efficiency, smart grids, clean energy and sustainable resources.
Each day, more than 200,000 additional people populate the planet2, further challenging how far natural resources must stretch to sustain human life, and CleanTech is creating genuine solutions to help address these challenges. This need for change is driving the global CleanTech market and this market is anticipated to reach US$3 trillion by 20253, up from US$601bn in 2014.
What does CleanTech mean for investors?
Consumers are demanding more of companies and governments, and they are increasingly lobbying them to make changes to their environmental policies, as the fear of unsustainable human civilization on earth deepens. Consequently, we are beginning to see a shift to CleanTech investing, as more companies embrace the circular economy and respond to the need for change. Businesses that are prepared to adapt should have a sustainable, competitive advantage by reducing their input costs over the long-term, and, they could see significant growth potential in the decades to come. We believe that this could provide investors with exciting, new investment opportunities in companies that should stand the test of time.
Investing in the Clean Economy
The ‘clean economy’ is the universe of companies whose activities improve resource sustainability, support the energy transition (from fossil-based to zero-carbon energy production and storage) or address the issue of water scarcity.
We have identified four key investment areas which are impacted by the finite amount of natural resources and we believe will provide innovative, new investment opportunities.
- Sustainable transport. Across the world, the demand for sustainable transport is increasing, providing investors with ample investment opportunities in electric vehicles, battery technologies, and, emission reduction systems.
- Smart energy. The necessity and demand for greener homes is growing, helping to provide the impetus and resources for the development of energy efficient technologies, creating investment opportunities in renewables, greener homes, and, efficient factories.
- Responsible nutrition. Companies are exploring new ways to meet the growing demand of rising populations, while limiting the use of scarce water and land, providing copious opportunities to invest in firms that are developing food and agricultural technologies.
- Recycling and waste reduction. Public opinion is shifting and putting pressure on companies to better manage supply chains and mitigate their environmental damage, providing investment opportunities in companies that are evolving their practices.
Why now for the Clean Economy
The world is changing, and we have identified three reasons why we believe now is the time for the Clean Economy:
1/ Environmental pressure is rising
2017 was the biggest year on record for natural disaster and 8/10 of the costliest natural disasters on record have been since 2000, underscoring the urgency to manage carbon emissions and limit global warming.
2/ Awareness is rising
Awareness of the impact of pollution is also increasingly driving individuals to lobby governments for change. For example, the Chinese state curtailed industrial production to the detriment of the country's GDP, in bid to pre-empt civil unrest over high levels of pollution.
3/ Action is rising
These pressures are steadily rising on the corporate agenda, and companies increasingly care about, and therefore act on, environmental concerns because their consumers care. Thus, we believe it is now essential for investors to look at resource sustainability factors from a risk mitigation perspective.
These three combined are encouraging governments and companies to reassess their policies and start to implement meaningful change and invest in the circular economy and new CleanTech.
All investments involves risks, including the loss of capital.
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Forecast to grow 10-15% annually until 2025*, the robotics industry is rapidly changing how we live and work
Just 9% of retail transaction are made online today, which will likely grow as smartphone adoption rises globally*
Ageing and Lifestyle
The number of over-60s is likely to grow more than 5 time faster than the under-60 population until 2030*
The growth of the global middle class is at a 150-year high, boosting consumption in Asia and the developing world*
1 Source: https://www.investopedia.com/terms/c/cleantech.asp
2 Source: Worldometer aggregate from United Nations Population Division, World Health Organization (WHO), Food and Agriculture Organization (FAO), International Monetary Fund (IMF), and World Bank, correct as at December 2018.
4 Source: AXA IM, Bank of America Merrill Lynch, The Clean Revolution, December 2017. Annual records for natural disasters are since records began in 1880; data for costs of natural disasters are since insurance records began in 1950.
*Ageing & Lifestyle - US Department of Commerce, latest data available as of March 2018
*Connected Consumer - Citi Research, Citi GPS “Technology at work v3.0”, August 2017
*Automation - IFR World Robotics Report 2017, latest available data as of March 2018.
*Transitioning Societies - UN, correct as at March 2018
*Performance Drivers - AXA IM, correct as at 29 December 2017
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